An aerial view of houses being built at a brand new housing development in the outer south eastern suburb of Clyde in Melbourne, Australia on May 12, 2026. Asanka Ratnayake/Getty Images
Treasurer Jim Chalmers has rejected claims by a lead NAB economist that rents in Melbourne and Sydney could rise by 25 or 30 percent.
This comes after the Labor government made sweeping changes to negative gearing and capital gains tax in the May federal budget.
Gareth Spence, the National Australia Bank’s (NAB) head economist, said those changes could spur investors to raise rents.
“The changes to the tax settings for investors in existing dwellings imply that gross rental yields will need to rise in order to compensate for the loss of tax benefits,” Spence said in an internal note to investors.
“For investment properties in Sydney and Melbourne, a rise in the rental yield of 1 percent (from around 3.5 percent) to around 4.5 percent implies an increase in rents of 25 percent to 30 percent, assuming the current level of house prices is unchanged.”
In response, Treasurer Jim Chalmers claimed the report did not take into consideration a “whole range of factors.”
“Whether it’s the grandfathering and the design of our policy, whether it’s developments in the housing market or in the economy more broadly,” he said on Sunrise.
“In fact, the NAB note itself recognises and acknowledges that it doesn’t take a lot of those things into consideration. And so it’s not a forecast for what they expect to see happen with rents. It leaves out a whole range of important considerations.”
The May budget outlined new policies including restricting negative gearing to newly built homes, instead of existing ones.
It also replaced the 50 percent capital gains tax (CGT) discount with a 30 percent minimum flat tax rate plus indexation to inflation.
Assistant Minister Andrew Charlton backed the treasurer, claiming the reports on rental increase “just don’t seem realistic.”
“The first thing to say is that the tax changes only came in a few months ago, and so 99 percent of the properties that people will be in at the moment are grandfathered,” he said on ABC radio on Aug. 18.
Charlton said the government is “building more homes” and growing supply in the rental market.
He argued that over time, this would put downward pressure on rents.
“In fact, that’s really the only sustainable long-term way to put downward pressure on rental prices,” he claimed.
Meanwhile, Liberal Senator Maria Kovacic said “no one would be surprised” by the NAB reports.
“I mean, it was absolutely absurd that this government suggested that there would be an increase in rents of about $2.00 a week. We all knew that that was rubbish,” she told reporters at Parliament House.
“It’s basic economics: if you have an impact to your supply chains, your demand will go up, and the costs will go up. It’s pretty simple.”
